APPLIED ECON (1st Sem.
Midterms) Satisfaction of humans wants &
Needs
- “stuff” we must have to survive
Wants
- “stuff” we would really like to
have for conveniences
Scarcity
- situation wherein the amount of
something available is insufficient
to satisfy all the needs and want
Shortage
- when there isn't enough stuff
Resources
- the things used to make other
goods
ECONOMICS AS DEFINED
“Oikonomia”
Oikos Nomos
- household -management
Adam Smith
- father of economics
- Book; “the wealth of the nation”
- capitalism
ECONOMICS
- study of how individuals &
societies make decisions about
ways to use scarce resources to
fulfill wants & needs.
- proper allocation & efficient use
of scarce resources for the max.
needs.
Importance of economics/reasons
why to start economics
1. How to make a living
2. How to use our money wisely
3. How to run our business
4. How to distribute properly our
available scarce resources
5. Maximize our profits and
consumers satisfaction among
other things
BRANCHES OF ECONOMICS
Micro economics
- specific
- deals with the economic behavior
of the individual units such as
customers, firms, owners of
factories of production
- “Micro” = small
- pricing & production decisions of
small industrial firms
- consumers behavior - output &
state of single industries
Macro economics
- general; economy as a whole
- economic behavior of the whole
- refers to management of income,
expenditure, wealth, resources of
nation
- how the economy functions as a
whole (total income)
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Concerns of economics Four Economic Resources/ Factors
of Production
1. Production
- process of producing/creating 1. Land
goods needed by households to - all natural resources use to
satisfy their needs produce goods & services
- INPUTS
- commodities/services that are 2. Labor
used to produce goods and - human resources/ efforts
services (physical/mental)
- FACTORS OF PRODUCTION
- OUTPUTS 3. Capital
- end product/finished product - human-made resources used to
produce stuff or provide services
2. Distribution 2 types;
- marketing of goods services to physical vs. human
different economice outlets for -nonhuman assets
allocation to individual consumers -education
Used by real
3. Exchange knowledge,
- process of transferring goods & humans
services to a person/people in abilities,experience
return of something in production of an
(money is the medium of employee
exchange in the market)
4. Management Entrepreneurial
4. Consumption Ability or Enterprise
- proper use of goods & services - management of the 3 other
factors of production
5. Public finance
- government expenditures &
revenues

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 Circular Flow of Economic
ECONOMIC PROBLEMS

1. What goods & services to

produce and how much?
2. How to produce the goods and
services?
3. For whom are the goods &
services?

ECONOMIC SYSTEM MODELS

1. Capitalism
Four sectors in the economy
- market economy,
free-enterprise
1. Household
economy, laissez-
-consuming unit
faire (economic
2. Firm
freedom)
-producing unit
- LLCMEA owned by
3. Government
private individuals
4. Rest of the world
- free competition
- profit motive
Satisfaction = utility
2. Communism
John Maynard Keynes
- LLCMEA owned by
- father of modern economics
government
- planned economy,
GREEK PHILOSOPHERS
command
1. Plato
economy, classless
- division of labor
society
2. Aristotle
- no private property
- functions of money
No economic freedom
3. St. Thomas Aquinas
No free competition
- distributive justice
On profit motive
(fair distribution of goods &
- presence of central
services)
planning
- compensatory justice(fair
exchange)

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 a. Slope: positive & decreasing
3. Socialism
- no 100% socialism
- mixed economy
- Karl Marx = father
of socialism
- owned by
government &
private individuals b. Slope: positive & increasing

DEMAND & SUPPLY

- an upward-sloping line describes a
positive relationship between x & y

c. Slope: negative & increasing

- if one point is going up, the other

follows
- ex. Law of supply

- a downward-sloping line describes a d. Slope: negative & decreasing

negative relationship between x & y

e. Slope: positive, then negative

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f. Slope: negative, then positive
2. Income
3. Population
4. Tastes & preferences
5. Price expectations / speculation
6. Prices of related goods
A.substitute
B. complementary goods
7. Climate
8. Advertisements
9. Introduction of new product
10. Social & economic condition

LAW OF SUPPLY
- P↑ Qs ↑
P↓ Qs ↓
Market
- a place where buyer & seller Determinants of Supply
exchange 1. Technology
2. Cost of production
Demand 3. No. of sellers
- when you have purchasing power 4. Taxes & subsidies(financial
- when your wants are backed up grant)
by purchasing power 5. Weather/climate conditions
- ability & willingness to buy a 6. Time period
particular good at a given point in 7. Price of related goods
time
Equilibrium of demand & supply
Ceteris Paribus Alfred Marshall
- other things equal/constant - proper contribution of law of
- without this, law of demand is supply & law of demand
ruined
Market equilibrium
LAW OF DEMAND
- P↑ Qd ↓
Qd P Qs
- Inversely proportional
5 1 1
Determinants of Demand
1. Price 4 2 2

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3 3 3
1. Elastic supply
2 4 4 - change in price creates a
greater change in Qs
1 5 5
2. Inelastic Supply
- change in price creates a lesser
LAW OF SUPPLY & DEMAND change in Qs
- S>D=P↓ 3. Unitary supply
- D>S=P↑ - change in price creates an
- S = D = constant equal change in Qs
4. Perfectly elastic supply
ELASTICITY - without change in price, there is
- reaction/response of the an infinite change in Qs
buyers/sellers whenever there is 5. Perfectly inelastic supply
change in price in goods & - change in P, creates NO
services change in Qs

Demand elasticity 1. Price Elasticity

- reaction/response of buyer = ep
- % change in Q in relation
1. Elastic demand to % change in P
- change in price creates a - > 1 - elastic
greater change in Qd - < 1 - inelastic
2. Inelastic demand - = 1 - unitary
- change in price creates a lesser Qn−Qo
change in Qd Qo
3. Unitary demand Pn−Po
- change in price creates an Po
equal change in Qd
4. Perfectly elastic
- without change in price, there is
an infinite change in Qd
5. Perfectly inelastic
- change in P, creates NO
cahnge in Qd

Supply elasticity 2. Income Elasticity

- reaction/response of seller = ey

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 - % change in Q in relation PA 21 (Philippine Agenda 21)
to % change in Y - nation’s blueprint for Sustainable
- > 1 - superior goods development
- < 1 - inferior goods - less ecologically destructive
- = 1 - normal goods
Qn−Qo Seven Dimension of Development
Qo
Yn−Yo 1. Spiritual Development
Yo - Acknowledge the spiritual
3. Cross Elasticity in nature, human beings
- % change in q of 1 good is and society in
in relation to % change in development.
p of related goods 2. Human Development
- + = substitute - Health, Education and
- - = complimentary / Income
complement 3. Social and Cultural
QnA −QoA Development
QoA - Promoting resource
PnB−PoB access and upholding
PoB
property rights
Sustainable Development
4. Political Development
- an image of society & a shared
- Empowering the people
vision of the development path of
- Maintaining peace and
the society.
order
- development that meets the
5. Economic Development
needs of the present without
- Maintaining sustainable
compromising the ability of future
population
generations to meet their own
6. Ecological Development
needs.
- Protecting the environment
7. Principles of Sustainable
3 key players define the goal of the
Development
development:
a. Primacy of Developing Full
human potential
1. Government
b. Holistic Science and
2. Business
Appropriate Technology
3. Civil society
c. Cultural, Moral and
Spiritual Sensitivity

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 d. National Sovereignty
e. Gender Sensitivity
f. Peace, Order and National
Unity
g. Social Justice, Inter- and
Intra- Generational Equity
and Spatial Equity
h. Participatory Democracy
i. Institutional Viability
j. Viable, Sound and Broad-
based Economic
Development
k. Sustainable Population
l. Ecological Soundness
m. Bio-geographical Equity
and Community-based
Resources and
Management
n. Global Cooperation

The Philippine Agenda 21 Visions :

1. Poverty Reduction
2. Social Equity
3. Empowerment and Good
Governance
4. Peace and Solidarity
5. Ecological Integrity